Taxes and Private Consumption Expenditures: A Component-Based Analysis for Turkey (original) (raw)
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Taxes and Private Consumption Expenditure: A Component Based Analysis for Turkey
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Trade balance is one of the most important indicators of economic stability. The increasing capital inputs in recent years, where capital liberalization is highly realized, make local currency more valuable. During this process that import grew while export went down, the foreign trade deficit has become greater, which impairs competition. Special consumption taxes that have been implemented more actively in recent years are intended to reduce domestic demand for import and avoid foreign trade deficits. This study examines whether there is a relation between the foreign trade deficit and special consumption taxes for Turkey between 01/2006 and 05/2013 using the Zivot-Andrews unit root test based on structural breaks, the Gregory-Hansen cointegration test and the Toda-Yamamoto causality analysis. Empirical practices in the study showed that neither series were stationary in level and there was no long-term relation between them. As a result of the Toda-Yamamoto method based on the Granger causality analysis, bidirectional causality was determined in between the variables.
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Tax Elasticity and Progressivity for Turkish Tax System
The impact of taxation on economic efficiency, income disparity and social welfare has been extensively studied both theoretically and empirically. This study intends to provide a comprehensive analysis of taxation in Turkey in two ways. First, a comprehensive analysis of some important aspects of the Turkish taxation is discussed by challenging some common arguments claimed in the previous studies. For example, Turkey's indirect tax revenue is 50 percent of total tax revenue, which is remarkably greater than the OECD average of 32 percent-see to OECD (2017). Has this always been the case, or is it a recent phenomenon observed as a result of the extensive liberalisation since 1980 as claimed by Köse and Yeldan (1998), Demir (2004), Arıkboğa (2011) and Arıkboğa (2015)? Second, this study explores issues which are worth clarifying regarding the Turkish tax system, in particular in the light of the graduation of Turkey to an upper-middle income country-see WorldBank (2017a). These questions are: how has the tax burden evolved over time compared to similar European economies? How has progressivity of Turkish tax system changed over time? How did sales tax cuts implemented during the 2009 crisis affect the consumer welfare? Departing from other studies which analysed the Turkish tax system, such as Mucuk and Alptekin (2008), Açikgöz (2008) and Durkaya and Ceylan (2006), this study uses the longest available dataset on tax revenue, which starts with 1924 and ends with 2016. Furthermore, while the aforesaid studies built their analyses on indirect and direct tax classification, this study disaggregates the tax revenue data into four groups: income tax, wealth tax, sales tax and import tax. These studies focused on tax revenue composition and its impacts on economic growth by applying dynamic time-series models like VAR models or Granger causality tests. Although they used the time-series data and derived tax elasticity figures, the studies above did not expand their analyses to cover tax progressivity. By contrast, this study takes a step to expand tax elasticity discussions by including tax progressivity, as presented in section 1.4. According to our knowledge, this is the first time that the 2 tax progressivity is analysed with time-series data, so enabling us to observe the evolution of tax progressivity for the Turkish tax system. The analysis in this study starts with an investigation of the historical tax revenue data to reveal the evolution of the tax burden compared to some developed economies in OECD. The analysis is followed by the investigation of indirect taxes with historical data starting from 1924 and ending with 2016. The change in decomposition of the indirect tax revenue is tested by applying Lorenz dominance. The following two subsections assess the Turkish tax system by deriving long and shortrun tax elasticity figures in respect to income, as well as tax progressivity indices based on the study by Kakinaka and Pereira (2006). In the first place, time-series characteristics of the data is checked and the presence of a long-run relationship between different tax revenue types and the GDP is tested (see Appendix for cointegration test results). After confirming the presence of a long-run relationship, short and long-run tax elasticity figures with respect to income are derived. Following this, it is shown that the Turkish tax system has become less progressive over time. In the last section, the effects of tax cuts imposed in 2009 are discussed with regard to consumer welfare. 1.2. STYLISED FACTS ON TAXATION IN TURKEY This section provides a chronological analysis of some important figures related to taxation in Turkey. The first subsection looks at the evolution of the tax burden for the Turkish economy and compares it with developed European economies. The second subsection carefully analyses chronological changes in the proportion of direct and indirect taxes on the total tax revenue. The third part (subsections 1.2.3 and 1.2.4.) conducts a more technical analysis to obtain tax elasticity and tax progressivity measures. 1.2.1. Evolution of Total Tax Revenue in GDP The first stylised fact of taxation in Turkey regards its share in the GDP: it has been steadily increasing, i.e. the tax burden in Turkey becomes more similar to developed economies. For comparison, three Mediterranean economies, Spain, France, and Italy are selected due to having close
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Abstract This study is about the behavior of main macroeconomic indiactors and their interaction with tax revenue with annual data over 1980-2013 in Turkey. The main purpose is to study the causality between tax revenue and a broad list of indicators over the stated period. First we present descriptive statistics and then test for the stationarity of the variables after which we test for the existence and direction of Granger causality between pairs of indicators proven to be stationary. In the last part of the study we search for the permanent long-run relationship via the existense of cointegration among variables after which we establish the error correction mechanism. We have intentionally selected the time span since Turkey has experienced several shocks before being addressed in the list of G-20 and a typical emerging market economy. Besides. the socalled great recession is included in the period and is still prevailing with perplexing attitutes of managing the crisis. Our results document that there is unidirectional causality from total tax revenue to foreign direct investment and external debt stock. In addition we report a cointegrating relation among tax revenue, GDP and external debt stock. Keywords: Tax Revenue, Macroeconomic Indicators, Stationarity, ADF, Granger Causality, Cointegration, Error Correction
Personal income tax elasticity in Turkey 1975-2005
Dokuz Eylul University Department of Economics …, 2006
The estimation of tax elasticity; the response of tax revenues to changes in income, is important for at least three reasons: i) formulating government budgets and monitoring tax collections (Sen, 2002), ii) the specification of tax functions, iii) the automatic stabilizing properties of the tax system and the public sector deficit .
The Relationship Between Tax Revenue And Economic Growth In Turkey: The Period Of 1975-2011
In the study, the relationship between tax revenues and economic growth for the Turkish economy has been examined in the period of 1975-2011. Johansen Juselious cointegration test and Granger causality test have been used in order to find long term and short term relationship, respectively. Impulse-response function and variance decomposition analysis have been applied via VAR model. The findings have shown that there is interaction between tax revenue types and the economic growth in the long term and is not such an interaction in the short term. The effect of the shock given to indirect tax revenue to economic growth rate has decline; the response of growth rate to shock given to direct tax revenue has been tendency to rise up towards the end of the period. In the variance decomposition method; direct tax revenue is more effective than indirect one. But, the growth rate that is expressed by GDP (gross domestic product) or other factors affecting growth rather than tax revenue has been appeared affected itself
An Evaluation of Indirect Taxes in Turkey
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The share of indirect taxes in tax revenues, specifically consumption taxes, is quite high in Turkey when compared to other OECD economies. This emphasis on indirect taxes in Turkey, as well as other developing economies, is argued to emerge from the inability of the government to collect direct taxes because of the existence of a large informal sector that is not easily taxable. It has been suggested that the recent increase in the indirect taxes puts the burden on mostly the poor, raising concerns of inequality. This paper evaluates the efficiency of the current indirect taxes in Turkey by taking into account distributional concerns. Using data from the 2003 Household Budget Survey, we estimate elasticities of different consumption goods and services using AIDS method. We then perform a marginal tax reform analysis to assess the efficiency of indirect taxes. Our findings indicate that there is room for improvement and the current tax rates are not optimal.